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Public finance

Government Proposes Significant Tax Relief for Lower and Middle-Income Sectors

Strategic Insights

— 2 min read

The government has proposed a four percent decrease in income tax across various slabs, aiming to alleviate the tax burden on salaried individuals. In the federal budget for the fiscal year 2025-26, Finance Minister Muhammad Aurangzeb emphasized the prime minister's commitment to lowering taxes on salaried individuals. The proposed decrease in income tax is expected to ease the existing tax structure and strike a crucial balance between inflationary pressures and individuals' take-home pay.

Key Takeaways:

  • The government has proposed a four percent decrease in income tax across all slabs, with individuals earning between Rs0.6 million and Rs1.2 million per annum set to receive significant tax relief, as the government has lowered their tax rate from five percent to one percent.
  • For those earning up to Rs100,000 per month, the federal budget proposes a reduction in the total tax amount from Rs30,000 to Rs6,000.
  • Individuals earning up to Rs2.2 million per annum will see a four percent decrease in tax on their salaries, bringing the rate down from 15 percent to 11 percent.
  • The government has extended some relief to the higher income bracket, with individuals earning up to Rs3.2 million benefiting from a two percent cut, reducing their tax rate from 25 percent to 23 percent.
  • The salaried class paid a staggering Rs331 billion in income tax in the eight months of the current fiscal, which is 1,350% more than the taxes paid by retailers.
  • The total income tax contributions by the salaried people during the July-February period of this fiscal year were Rs120 billion, or 56% higher than the Rs211 billion collected during the same period of the last fiscal year.

Statistics:

  • Rs0.6 million (Rs50,000 monthly)-Rs1.2 million per annum: tax rate reduced from five percent to one percent
  • Rs100,000 per month: total tax amount reduced from Rs30,000 to Rs6,000
  • Rs2.2 million per annum: tax rate reduced from 15 percent to 11 percent
  • Rs3.2 million: tax rate reduced from 25 percent to 23 percent
  • Rs331 billion: income tax paid by the salaried class in eight months of the current fiscal (January 2023)
  • Rs331: income tax paid by retailers in the eight months of the current fiscal (January 2023)
  • 1,350%: increase in income tax paid by the salaried class compared to retailers in the eight months of the current fiscal (January 2023)
  • Rs120 billion: total income tax contributions by the salaried people during the July-February period of this fiscal year
  • 56%: increase in total income tax contributions by the salaried people during the July-February period of this fiscal year compared to the same period of the last fiscal year
  • Rs211 billion: total income tax collected during the same period of the last fiscal year

Sources:

  • "Government proposes four per cent decrease in income tax" [No author], The Express Tribune, March 14, 2023.
  • "Government presents Rs10.6 trillion budget for FY2025-26" [No author], The News International, March 14, 2023.
  • "Salaried class paid Rs331b in income tax in eight months" [No author], The Express Tribune, March 11, 2023.

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